Crude oil speculative positioning has returned to its March lows, despite voluntary production cuts announced by some OPEC+ members on April 2, Standard Chartered analysts noted in a new report sent to Rigzone.
In the report, analysts noted that their crude oil money manager’s positioning index, which they say is based on positioning in the four main Brent and WTI contracts as a percentage of open interest relative to extremes of five years, fell 8.5 points last week. week up to -99.6. This is very similar to the position at the start of the pandemic in 2020 and after the collapse of SVB, analysts note in the report.
“Speculative short positions have increased by 123.9 million barrels over the past four weeks, the biggest four-week increase since November 2018, while longs have fallen by 107.9 million barrels over the same period” , analysts say in the report.
“We believe the latest accumulation of short positions significantly increases the likelihood of further production cuts when OPEC+ meets on June 4,” they added.
“Saudi Arabia, in particular, has often expressed its determination not to give free rein to speculators to force an extreme drop in prices,” they continued.
The analysts note in the report that while the fundamental outlook embedded in the speculative shorts appears to be considerably more pessimistic than that of major forecasting agencies or the analyst consensus, they think that “key OPEC ministers could wanting to react mainly to this extreme end.view down to try to stop the recent influx of money to the short side”.
Latest EIA data
The latest data from the Energy Information Administration (EIA) is unlikely to improve either market sentiment or OPEC ministerial sentiment, Standard Chartered analysts noted in the report.
“Our bullish US oil data index fell 66.7 week-on-week to a very bearish -49.7, with crude inventories rising 5.65 million barrels versus the five-year average” , analysts said in the report.
“Demand indications were particularly weak, with a monthly decline across all product categories helping to reduce our 157.2 week-on-week demand sub-index to -90.6,” they added.
“There is more positioning and weekly data to come ahead of the OPEC+ meeting which could still change sentiment, but we believe the latest data has increased momentum towards a defensive cut,” they continue the analysts.
Standard Chartered’s latest report shows there have been 30 bearish, 12 bullish and 10 neutral readings for its US oil data index over the past year. A very bearish categorization has been seen 11 times in the past year, according to the report, which noted that the previous reading was slightly bullish.
Concern about oil balances
In a separate report sent to Rigzone last week, analysts at Macquarie Bank Limited said they remain slightly optimistic on crude oil direct balances over the coming weeks, but added they remain concerned about global oil balances.
“From our point of view,… [the w/c May 8] The drop in prices was driven by US economic data and the debt ceiling situation,” the analysts said in the report.
“We expect a rapid increase in refining runs to tighten direct crude oil balances, but the total oil balance could soften as demand growth slows, particularly in large OECD countries,” they added .
In this report, Macquarie Bank Limited noted that WTI+Brent speculative net duration decreased by 21.6 thousand contracts to 127.5 thousand, with shorts increasing by 27.2 thousand, while longs increased by 5 .6 thousand, and that the net position managed decreased by 19.4 thousand to 268 thousand. – with short contracts up 32.9K, while longs rose 13.5K.
Brent MM + Other net short rose by 21.2k contracts to 172.1k, with shorts up 16.8k while longs declined 4.4k, and Brent Managed Money net duration fell by 30.7K contracts to 113.6K, with shorts growing 27.9K while longs fell 2.8K, the report revealed.
Brent fell from a close of $77.44 a barrel on May 9 to $74.17 a barrel on May 12, while WTI fell from a close of $73.71 a barrel to a closing at $70.04 per barrel during the same period. At the time of writing, Brent is trading at $77.55 per barrel and WTI is trading at $73.70 per barrel.
At the last OPEC and non-OPEC ministerial meeting, which was held on December 4, 2022, the participating countries decided to hold the next OPEC+ meeting on June 4, a statement revealed published on the OPEC website in December last year. In April this year, a separate statement posted on the OPEC website noted that the next meeting of the Joint Ministerial Monitoring Committee (JMMC) is scheduled for June 4. The previous JMMC meeting was held on April 3.
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